Liz Kendall challenged Jeremy Corbyn’s view that Osborne's austerity measures were wrong, after the left-wing candidate asked the audience why so many people were begging on the streets.

Corbyn also criticised Tony Blair's legacy, saying his New Labour government led to the "promotion of markets rather than a planned economy, so we ended up with a greater sense of deregulation than we should have had".

Kendall, seen as the Blairite in the race, called on Labour to "back businesses and wealth creation, because without that, we can't invest in the public services we need or create decent jobs".

She said the party could not tackle inequality and other issues unless the UK had a strong economy. In response to Corbyn, she said:

I don’t agree with Jeremy on this. People didn’t trust us on the economy or with their taxes. I believe in strong public finances because unless we balance the books, live within our means and get the deficit and debt down, we can’t do all the things we are passionate about – like tackling inequality or homelessness.

We have to back businesses. We should be supporting people who bust a gut to set something up and work hard and create money.